Demand Chart Review

Institutional buying is visible in the shares of Shoe Carnival over the past 12 months through three positive spikes that combine to form a Stair-Step pattern. Underpinning the recent buying, the company beat earnings estimates for the fourth consecutive quarter in Q2 on stronger than expected comparable store sales of 6.7%. Shoe Carnival is yet another retailer that appears to be rising from the ashes of the “Amazon Effect” as it streamlines operations and improves customer offerings.

The institutional selling that has plagued select technology and market leaders since February continues to pressure each rally. While Q1 earnings are coming in as strong as expected, institutions are selling tech stocks into price pops to decrease exposure to the sector. Correspondingly, defensive, large dividend paying stocks such as utilities and REITs were the prime beneficiaries of this rotation trend last week.

After Alphabet/Google posted yet another strong quarter in Q1, investors watched initial gains evaporate under a wave of institutional selling leading to a third negative spike (3). At present, Google and Facebook remain the most heavily sold FANG stocks.

Shares of Paypal faded late day following a strong Q1 report and gave back all of the post‐earnings gains the next day. Heading into the report, Paypal shares were already under the strain of institutional selling since late 2017.

Caterpillar lies at the center of the trade tug‐of‐war between the U.S. and China. Comments from CATs CFO of Q1 earnings being a “high water mark” for 2018 buckled an already weakening institutional demand trend (1).

Despite great biotech success stories in 2018 highlighted by last week’s acquisition of gene therapy developer AveXis, large biotech stocks have been plagued by institutional selling over an extended period. There has been a growing performance split between smaller promising biotechs and their major biotech peers. From competitive pricing pressure to expiring patents to Trump, several leading biotechs are being weighed down by institutional selling pressure.

Celgene’s share price hasn’t been the same since the company slashed its 2020 revenue forecast of more than $21 billion. This lower outlook precipitated institutional selling highlighted by the major negative spike at 1 and minor spikes that have followed. Despite a lower share price there still remains no institutional interest in Celgene.

While Allergan holds the favorable distinction of offloading its generic business to Teva at the top of the market, its shares have been under heavy institutional selling pressure since the negative spike at 1.

The institutional trend of Biogen is more “favorable” at neutral (blue line) over the past three years though still under the influence of selling all the way back in 2015. The absence of negative spikes since the initial spike at 1 has led to a flattish institutional trend.

While clear damage to the institutional support of the market was sustained in March, thus far into April institutional selling has been relatively light. The primary source of market volatility appears to be an absence of material support during sell-off’s exacerbating the overall market declines. This continues to be a minor positive heading into earnings.

Share price declines in Boeing as a result of trade rhetoric have weighed on the Dow Industrials since February. Boeing has become a pawn in trade talks with China and a negative outcome implies fewer jets sold into the country. However, the institutional trend in Boeing thus far remains remarkably resilient despite the war of words.

The same calculus applies to tractors sold by Caterpillar into China. The institutional trend is currently neutral (blue) due to a slight downward trajectory of the lines as compared to Boeing although it too remains remarkably resilient.

Shares of Macys have taken direction from a shift in institutional sentiment to buying from selling beginning with the positive spike at 1. The institutional chart of Macys tacked on two additional spikes (2 and 3) revealing a more consistent trend of buying over the past four months.

Conversely, Bed, Bath and Beyond is suffering from a distribution trend as institutional sellers continue to weigh on its shares. The negative trajectory of the LSI lines indicate that the selling trend may not be over.